Pay for performance: a cure for hospital medicine’s reimbursement problems?

August 2005

Published in the August 2005 issue of Today’s Hospitalist

While pay-for-performance systems may make physicians nervous, one of the founders of the hospitalist movement thinks they may provide a solution to the question of how to pay hospitalists for the various roles they play in inpatient care.

“We have a problem that the fees we receive for professional services don’t recognize the 24-hour-a-day availability we provide,” explains Winthrop F. Whitcomb, MD, director of performance improvement at Mercy Medical Center in Springfield, Mass., and one of the hospital’s 15 practicing hospitalists. While hospitalists help boost the bottom lines of hospitals through their work on committees and quality improvement projects, he adds, they often aren’t rewarded for this added value in their compensation.

One way to pay hospitalists for the work they provide above and beyond patient care, Dr. Whitcomb says, is to tap into the funds that health plans and other payers are offering to hospitals as an incentive to improve performance. The hospitalists at Mercy have done just that over the last 18 months, a move that has not only increased their compensation but helped improve quality throughout the hospital.

During his presentation at the Fall 2005 Hospitalist CME Series in Philadelphia on Sept. 26, Dr. Whitcomb will explain how the hospitalist program at Mercy has embraced the pay-for-performance movement in the last 18 months. He will also lead a discussion about how broader issues in the pay-for-performance arena affect hospitalists.

(For more information on the conference series, go online.)

Three quality measures

The pay-for-performance program at Mercy got its start when Blue Cross Blue Shield of Massachusetts asked hospitals around the state to focus on several quality “core measures” from a list created by the Joint Commission on Accreditation of Healthcare Organizations.

After working with its hospitalists, Mercy agreed to try to do the following:

  • Raise its pneumovax rate for pneumonia patients to 45 percent.
  • Give ACE inhibitors to heart failure patients 85 percent of the time.
  • Document ejection fractions in heart failure patients at least 85 percent of the time.

If the hospital as a whole met those goals, it would receive a bonus payment from Blue Cross Blue Shield of Massachusetts. The hospital agreed to split any bonus money it received with its hospitalists, who care for about 85 percent of inpatients at Mercy. Dr. Whitcomb says the hospitalists agreed to divide any bonus dollars evenly among themselves.

He says the initiative was successful, noting that the fulltime hospitalists at Mercy received a bonus that equaled about 7 percent of their annual pay.

“It worked very well,” he says. “We watched [the rates] every week, and we fed the information back to the hospitalists every month. We knew within a few months that we had nearly doubled our rates of pneumovax, for instance.”

Lessons learned

Dr. Whitcomb says that he learned some valuable lessons from Mercy’s pay-for-performance initiative. The first, he says, is that doctors will respond to a financial incentive as long as the money on the table is substantial enough to mean something “and the task is achievable.

On the less positive side, Dr. Whitcomb says, he learned that pay for performance alone will not answer the question of how to improve quality in hospitals, in large part because the processes of delivering care are so complicated and interconnected. Even something as seemingly straightforward as giving pneumococcal vaccine to pneumonia patients very quickly becomes complicated.

He rattles off a list of factors that can overwhelm a pneumovax initiative: The hospital needs to have an adequate supply of the vaccine. Patients need to understand the benefits and risks of receiving the vaccine, and a nurse needs to be available to administer it.

“Even the best-intentioned doctor might forget,” Dr. Whitcomb explains, “or the nurse forgets. You have to ask patients if it has been five years since they last received the vaccine to make sure they are eligible for it. These can all be difficult things.”

More complex measures

While Mercy and its hospitalists did well under the pay-for-performance initiative, the program has become significantly more complicated this year. As Dr. Whitcomb explains, Blue Cross came back and said “it was too easy, so we’re changing it.”

As a result, the hospital is involved in two pay-for-performance projects, but the initiatives reward measures that give hospitalists a limited chance to exert any influence: reducing pressure ulcer rates and rates of urinary tract infection after surgery.

In addition, Dr. Whitcomb says, Mercy’s pay-for-performance bonuses are now linked to a longer list of factors that includes a dozen or so quality measures from the Joint Commission. The hospital has also created a “good citizenship” requirement, which requires physicians to play a meaningful role on a hospital committee. “It’s become diffuse and very complicated,” Dr. Whitcomb says.

And while he says that it’s up in the air whether this new incarnation of pay for performance will be as successful as the first, the good news is that the entire culture of the hospital is embracing the quality improvement movement.

He says that the hospitalists at Mercy “along with many other health care professionals “are now focused on ways of improving the processes of doing all sorts of things. In addition, an improvement in one area tends to spill over and allow for improvement in others.

In his new position overseeing clinical quality improvement at Mercy, Dr. Whitcomb now has a chance to see the big picture. After 10 years of running his hospitalist group, Dr. Whitcomb cut back his hospitalist practice to half-time earlier this year and took on new duties. In addition to his quality improvement work, he also is now director of hospitalist services for Catholic Health East, a 32-hospital system, two-thirds of which have hospitalists.

“I don’t have to worry about these core measures being fulfilled anymore because people have now incorporated them into their habits,” he explains. “You see people get habituated to these new things.”

In some cases, focusing on three core measures produced a halo effect that drives performance in other areas as well. “Because the areas are all related, if you are looking at one, you will be looking at the others also,” Dr. Whitcomb explains. “We definitely saw an overall improvement.”

The role of physicians

And a large part of why change becomes so ingrained stems from the fact that hospitals reorganize themselves to make sure they are geared to effect quality improvement.

“What we’re seeing at hospitals that are making these improvements effectively is that a whole structure is being created to oversee performance and feed it back to the doctors,” Dr. Whitcomb says. “It’s no longer someone coming in every six months and saying, ‘Don’t forget to do those 23 things.’ It’s more of a day-in and day-out variety of mechanisms that include one-on-one education, formal education events, regular feedback of data, and reminders on charts and bulletin boards around the hospital showing performance. We have created a new culture.”

In Mercy’s hospitalist group, for instance, each physician is in charge of tracking how well the hospital is meeting one Joint Commission core measure and reporting back as needed. In addition, one hospitalist goes to every Monday morning meeting of the hospital’s quality improvement committee. “This is important for buy-in,” Dr. Whitcomb explains.

What experience has shown, he says, is that doctors must feel they have some control over an incentive program, be it quality or productivity, to be successful. And they have to feel the system is fair.

Adding extra pay for championing these quality improvements makes this a particularly exciting time for hospitalists, Dr. Whitcomb says.

“In our field, there has been a problem of not getting enough compensation for physician services,” he explains. “We see the dollars that are potentially available through pay for performance as the best near-term hope of recognition of the value we provide. From the beginning, we have been doing this work, but we are finally seeing some financial recognition of these activities.”

Deborah Gesensway is a freelance writer who reports on U.S. health care from Toronto, Canada.